Money mindfulness: How to get back to basics in the digital age

As it becomes easier than ever to tap and pay our money away, finance expert Lisa Montgomery takes us through a simple way to get back on track.

From Afterpay to Uber Eats, technology has made it possible to spend seamlessly.

As consumers, we've become tap-happy. We want it in both colours, express shipped. We set and forget our financial products and services. We like the convenience and speed of food delivery apps and rideshare services – and direct debits sail out of our accounts without us paying them a thought.

Such advancements in technology mean that most of us now navigate the everyday spending maze armed with little more than a smartphone to take care of everything. But this spending seamlessness often leads to money mindlessness.

And this is costing us perhaps more than we care to realise.

With a potential recession looming, now is the time to break the spending habits that are holding us back financially. But in order to regain control of our money and combat these behaviours, we need to first identify them.

We can do this by going back to the basics and conducting a financial audit.

For some, the word "audit" conjures up negative feelings. But trust me – spending audits are a quick and simple way to get in touch with your money.

They unearth insights into your personal spending habits, provide an in-depth view of your financial landscape and flag areas where you could be saving. This in turn will help you to make more considered decisions around your spending.

Start your audit by printing out a hard copy of your statement (yes a hard copy), dating back three to six months. Having a physical copy of your statements makes your transactions more tangible. You can pinpoint and connect with your past purchases on a deeper level than if you were scrolling through them online. You can also highlight or flag any that you're concerned about.

Comb through your transaction history and categorise your purchases into mandatory, essential and discretionary spending – different coloured highlighter pens are a good way to do this. You can then begin to analyse your purchases.

First, take a look at your mandatory expenses. These are your non-negotiables: your rent or mortgage payments, utility bills and insurance premiums. Review your current financial products, policies or providers, then work out how much you could potentially save by switching elsewhere.

For instance, a mortgage holder with a loan of $350,000 and a rate of 3.69% would spend $1,571 on monthly repayments. But if they were to switch to one of the lower rates currently on the market at 2.69%, their monthly repayment would drop to $1,417. This simple switch would save $150 per month or $1,800 per year. And that's just the start, This can easily be done for your car insurance, utility bills and healthcare policies as well.

Next up are your essentials. These are the items you absolutely can't do without, such as basic groceries, clothing and transport costs to get to and from work. This is where you need to be strict about what is "essential" and what isn't.

For example, you might be paying for an "essential" gym membership you rarely use (around $96 per month), when you could be exercising outdoors for free. You might hold a subscription to both Netflix ($13.99 per month) and Stan ($14 per month), when you really only use one. By ditching two of these three memberships, you're already saving around $109 per month, or $1,319 per year.

Last but not least is discretionary spending. This includes small luxuries such as Uber, Afterpay, Deliveroo, eating out and coffee. Consider the circumstances around your discretionary purchases. Are they occurring when you're out and about with friends and feel pressured to spend more? Are you prone to ordering an Uber after a few drinks, when public transport would suffice?

It's important to become aware of these patterns if we want to change them. For instance, you might find you have a habit of ordering two Uber rides each weekend at a cost of $20 each. Over a year, this will set you back $1,920. If you become aware of this during your audit, the next time you're out on the weekend, you can mindfully switch to public transport instead. Building on the example above, if public transport cost you $3.50 per trip, it would set you back just $336 per year – saving you $1,585 per year.

Combing through your transaction history can be confronting but it's important to understand your spending behaviours if you want to regain control. This is why audits are so effective.

Conducting your own financial audit shouldn't take more than an hour or so to complete. With the potential savings that can arise from doing this, I can guarantee it will be the most valuable hour you've ever spent.

Lisa Montgomery is one of Australia's most respected consumer finance experts and commentators. She is the former CEO of Resi Home Loans and Head of Consumer Advocacy at Wizard Home Loans.

Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.

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